Should the Bank of Industry (BoI) be scrapped? No, say members of the Organised Private Sector (OPS), who are kicking against a bill before the Senate to merge BoI, Bank for Commerce and Industry and National Economic Reconstruction Fund to form the National Development Bank of Nigeria (NDBN). Rather than scrap BoI, which they say is performing, the Federal Government should strengthen it to do better or allow it to exist along with the proposed NDBN. Assistant Editor CHIKODI OKEREOCHA reports.
A groundswell of opposition is trailing the move by the Senate to scrap the Bank of Industry (BoI) and other Development Finance Institutions (DFIs) and replace them with the proposed National Development Bank of Nigeria (NDBN).
The Manufacturers Association of Nigeria (MAN), the Lagos Chamber of Commerce and Industry (LCCI), the Chartered Institute of Bankers of Nigeria (CIBN) and the Nigeria Labour Congress (NLC), among others, are up in arms against the plan, warning that it would be counter-productive.
A bill for an Act to establish the NDBN to replace the BoI and other (DFIs) was sponsored by Senator Ibrahim Gobir (APC, Gombe-East). The bill, which has passed the second reading is seeking to merge the BoI, Bank for Commerce and Industry and the National Economic Reconstruction Fund to form the NDBN.
Gobir had explained that the rights, interest, obligations and liabilities of the three DFIs would be assigned to and vested in the proposed NDBN. But if Gobir was expecting to get the buy-in and support of stakeholders and operators in the economy, he was wrong.
Indication that the proposed scrapping of BoI was a hard sell emerged last week at a public hearing organised by the Senate Committee on Banking, Insurance and Other Financial Institutions on the establishment of the NDBN. The Nation learnt that virtually all the major stakeholders insisted that BoI must stay.
The NLC insisted that rather than scrap the BoI, which it said is performing,the bank should be strengthened to do better. “It is important that we have a bill to strengthen these institutions rather than do away with them. So from the point of view of labour, when we hear of dissolution of BoI, it is a bit scary and you know there is a lot of frustration in the land,” a member of NLC’s National Executive Council, Comrade Issa Aremu, said.
The position of the labour unionist was partly informed by what the labour movement considers as BoI’s immense contributions to Nigeria’s economic growth and stability, particularly the development of Small and Medium Enterprises (SMEs). He said the SMEs remain the engine of economic growth and development.
Aremu said: “I want to bear witness today that BoI has been thinking outside the box to help the intolerance of our industries, including the SMEs. I say so because I am also from textile industry, which we know is facing a lot of challenges.
“There was a time in Nigeria when we used to be the third largest producer of textile in Africa. Today, we are beaten to it by small countries like Mauritius, Kenya because they are adding value to cotton value chains, thereby creating more jobs. But with BoI’s efforts, we have been making effort at recovery.”
It was not an empty claim. Aremu recalled, for instance, that the United Nigeria Textiles (UNTL) Plc, arguably West Africa’s biggest textile mill, in Kaduna, was shut down in 2007 because of smuggling and lack of electricity and finance.
The industry, he said, could not access long term funding because commercial banks believe in short-term lending at multiple interest rate. However, according to him, relief came when BoI in conjunction with the United Nations Industrial Development Organisation (UNIDO) worked out a long time financing for the industry.
The funding, according to Aremu, was to the tune of N100 billion at a single digit interest rate of five to six per cent and long-term repayment. “On account of this financial intervention, UNTL came back in 2010 and with direct jobs of about 1, 500. It is still in existence today.
“Now many other factories also took advantage of that and when we did the validation assessment of this effort, close to 10, 000 jobs were not only saved, but few other jobs were also created,” he said.
Encouraged by this and similar interventions by the BoI, Aremu did not mince words when he told the Senate Committee that “we should try and recapitalise BoI further to make it more effective to do more interventions.
The proposal to merge the BoI with others did not also go down well with the LCCI. It’s Director, Trade and Promotions, Mr. Olanihun Mayowa, said the BoI has, over the years, managed to build brand equity such that the confidence the name inspires in business operators and Nigerians cannot be jettisoned.
Mayowa suggested that rather than scrap the BoI, the DFI should be allowed to play in the wholesale level, while other DFIs play at the retail level.
MAN has also kicked against it. Its representative, Dr. Ajayi Kadiri, noted that the BoI has been functioning and delivering on its mandate within the limits of funds available to it. He said the bank has had funding challenges and MAN has been in the forefront, advocating its recapitalisation.
“Going through the proposed bill, we can hardly see any value addition to be derived or achieved by the NDBN that is not already being rendered by the BoI; neither is there any difference from what the BoI is licensed to carry out. The BOI has so far carried out these services to the satisfaction of stakeholders, including the business community,” Kadiri said.
The CIBN has also lent its voice to the growing list of those opposed to the proposed scrapping of BoI. CIBN First Vice President Dr. Uche Olowu said that after reviewing the act, the Institute came to the conclusion that “in a football team, you don’t change a winning striker.”
His words: “It is our view that BoI should be allowed to function the way they are because they have been tested and done properly especially in the retail space.” He added that by consolidating the DFIs, the liabilities will further depress BoI’s financials.
The acting Managing Director of BoI, Mr. Waheed Olagunju, had earlier highlighted some of the bank’s interventions as well how the bank has been able to mobilise resources domestically. He said, for instance, BoI has continued to wax stronger such that it was appointed to manage the Cotton, Textile and Garment (CTG) N100billion Fund.
Olagunju added that state governments are also partnering the BoI. “We have raised over N18billion under our partnership with state governments,” he said, pointing out that if BoI were not a well-managed institution, a key private sector player like Alhaji Aliko Dangote wouldn’t have partnered it to establish a N10b MSME Fund.
The BoI chief also pointed out that based on the quality of BoI’s financials, the Ooni of Ife, Oba Enitan Oguwunsi, recently entered into a N1b partnership with the bank. The traditional ruler, he said, made N500 million available to BoI, while the bank matched it with N500 million, which it will lend at concessional rates. The bank is also jointly financing solar power projects in Nigeria aside its involvement in mining activities.
Interestingly, some of BoI’s activities have not gone unnoticed by various international rating agencies. For instance, Fitch rated the BoI AA+ last year, which was affirmed this year. Moody’s also assigned the bank Ba3 last year and this year. This was on the strength of its balance sheet and quality of corporate governance. Agusto also assigned BoI A+ last year. This year, it upgraded it to AA+.
However, BoI’s track record of performance may have failed to impress some Nigerians. For instance, the Minister of Finance, Mrs. Kemi Adeosun and the CBN Governor, Mr. Godwin Emefiele, have backed the Senate’s move to scrap the BoI.
Adeosun, who was represented at the public hearing by a Director in the Ministry of Finance, Mr. Christopher Gabriel, said the ministry strongly supported the bill titled: ‘A Bill for an Act to Establish the National Development Bank, 2015.’ The Minister said that the proposal was in tandem with the Federal Government’s economic reconstruction efforts.
